BoE Balances Inflation Risks and Growth Slowdown with Rate Cut

The British pound trades at 1.235 after the BoE cut rates to 4.5% and halved its growth forecast to 0.75%. Governor Bailey downplayed expectations of deeper cuts, but uncertainty persists. The BoE also raised its inflation forecast to 3.7% from 2.8%, highlighting the challenge of balancing rate cuts with price pressures. With three cuts since August, traders still expect 60bps of easing this year. Meanwhile, US markets shrugged off the latest jobs report, supporting the Fed’s stance on a strong labor market with no urgent rate adjustments.

The first resistance level for the pair will be 1.2500. In the event of this level's breach, the next levels to watch would be 1.2600 and 1.2650. On the downside 1.2340 will be the first support level. 1.2265 and 1.2100 are the next levels to monitor if the first support level is breached.